Wednesday, June 15, 2005

It's no game

When you're not using your broadband connection to make cheap outgoing calls on BT Fusion (outgoing minutes on the PSTN average about 7 per day, outgoing mobile minutes about 3 per handset), here's another way to occupy your time and spend the money you're saving on mobile. Vivendi Universal Games subsidiary Blizzard has 2m paying customers worldwide for its World of Warcraft MMORPG, up from 1.5m just three months ago. Monthly subscriptions cost $14.99 for month-to-month, $13.99/month for three months, or $12.99/month for an annual subscription. If we're looking conservatively at 3m paying subscriptions by year-end, that implies annual run-rate revenues of $500m.

Telcos, you're selling the wrong service! At a recent industry conference where I was fortunate enough to be moderator for the entire day, I heard a couple of very bright people talk about the need for the industry to move from selling minutes to "selling experience." This is probably an unpopular point of view, but why aren't telcos using their abundant cash to buy content/experiential assets, rather than merely aggregating/reselling it? Can we imagine a music label which doesn't have a publishing arm, or a film distribution business which is not connected in some way to origination/production?

Looking at the broadcasting world, some years ago BSkyB (in)famously tried to buy Manchester United, which is only now really flexing its muscles as an independent media brand, and in the telecom world the only player to take a serious stab at it was Telefonica, though strategic architect Juan Villalonga was subsequently exiled to Siberia (uh, Miami), and the company has now moved to the opposite end of the absurdity spectrum - acquiring network assets in the Czech Republic rather than content assets in the sizeable Spanish-speaking world which is its stronghold.

If we accept that the future for pure service/content aggregators is ugly, then why not take the much-publicized abundant cash flow of the telecom industry and actually deploy it in trying to secure a meaningful place in the value chain for the long term? If you have the eyes/ears of millions of consumers, why not take an active role in generating cash from their interests, rather than just facilitating them? In its most extreme embodiment, instead of fretting about late entry strategies for markets like India or Brazil, why doesn't the only truly global player in the sector, Vodafone, move way outside the box and make a move on a truly global media brand?

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